One decision changes the next. PlannedWell helps clients and their professionals coordinate tax decisions with healthcare, retirement income, business, estate, and family priorities.
The connected decision
A Roth conversion is never only about today’s tax bracket.
Moving money from a pre-tax retirement account to a Roth account generally creates taxable income in the conversion year. The potential benefit appears over time: a different balance between taxable, tax-deferred, and Roth assets and greater flexibility in future withdrawal decisions.
The right question is not, “Should we convert?” It is, “How much income, if any, should we intentionally recognize this year after considering every connected cost and future benefit?”
What the model should include
Current-year tax
Ordinary income, deductions, credits, investment income, capital gains, state taxes, and available cash to pay the tax.
Healthcare
Marketplace coverage before Medicare and potential Part B and Part D IRMAA after Medicare enrollment.
Future distributions
Expected required distributions, pensions, Social Security, business income, and other sources that may fill later brackets.
Portfolio location
The long-term role of pre-tax, Roth, HSA, and taxable assets and the liquidity available outside retirement accounts.
Estate and heirs
Who is likely to inherit the assets, the expected distribution rules, charitable intentions, and the heirs’ possible tax circumstances.
Flexibility
Whether the conversion creates more options later or consumes cash and tax capacity needed for another goal.
A multi-year framework
Find the years when income is most controllable
The years around retirement can create a temporary tax window: wages may have stopped, while Social Security, pensions, and required distributions have not fully begun. That window does not automatically make a conversion wise, but it makes deliberate modeling more valuable.
The annual decision sequence
- Project income and deductions without a conversion.
- Identify the household’s available cash and near-term spending needs.
- Model several conversion amounts and their federal and state tax effects.
- Test the interaction with capital gains, Marketplace coverage, Medicare IRMAA, credits, and other income-sensitive items.
- Compare future required distributions and the projected account mix under each option.
- Consider heirs, charitable goals, and the surviving spouse’s future filing status.
- Choose an amount only after the current-year information is sufficiently complete, then verify withholding or estimated payments.
Reasons a smaller conversion may be better
- The additional income changes healthcare costs or other income-sensitive items.
- Cash to pay the tax is limited or needed for near-term spending.
- A large gain, bonus, property sale, or other income event already fills the year.
- The household expects a future low-income year with more favorable conditions.
- State residency may change.
Meeting worksheet
Bring one set of assumptions to every professional
Income and tax
- Year-to-date wages, business income, pensions, Social Security, interest, dividends, gains, and rental activity
- Expected deductions, charitable gifts, credits, and loss carryovers
- Prior-year return and current-year projection
- Federal and state estimated payments and withholding
Accounts and cash
- Traditional IRA, employer plan, Roth, HSA, taxable, and cash balances
- Expected spending for the next three years
- Source of conversion-tax payments
- Required distribution projections and pension elections
Healthcare and household
- Current coverage, Medicare status, and upcoming eligibility dates
- Recent IRMAA notices or premium information
- Expected retirement, move, sale, or other life-changing events
- Estate beneficiaries, charitable intentions, and likely survivor circumstances
Questions to ask
- What problem are we trying to solve, and which assumptions matter most?
- What other decision becomes more expensive if income increases?
- How will the tax be paid, what could change the analysis, and when will we revisit the decision?
Official references
Use current primary sources.
Rules, deadlines, limits, and enrollment details change. These official sources are a starting point for verifying current information.